9 February 2016

African Resource Rich Countries Are 'Addicts in Need of Rehab'

Resource rich African countries are addicts that are in need of rehabilitation now that the good days are over, according to former Zimbabwe finance minister Tendai Biti.

It appears ironic that resource poor countries like Rwanda, Kenya and Ethiopia are experiencing growth, while resource rich countries like Nigeria and Angola are battling, Biti told the Investing in African Mining Indaba on Tuesday.

"They (resource poor countries) have moved to fully diversify their economies," he said. "Diversification is key, but African leaders (in resource rich countries) don't learn. The boom and slumps have been with us for a long time. It (the lessons) should have been learnt a long time ago."

He said the "silver lining to the current slump was for policy makers to see this as an opportunity for diversification".

The cure to Dutch disease

Countries rich in mineral and energy resources are infamous for catching the so-called Dutch Disease. This is an economic term that explains the negative consequences caused by an unnatural focus on a specific sector, to the detriment of all other sectors.

African countries, especially ones with extractive institutions, are often prone to this dilemma.

"The resource (rich) case is a mandate to killing collective creativity in particular economies because of a dependence on a particular mineral, be it diamonds, iron, or gas," Biti said.

"Without beneficiation, value addition and industrialisation around commodities, the minerals have hardly touched communities," he said.

Marange diamond field

He used the example of the Zimbabwean Marange diamond field, which has seen $2bn worth of diamond extraction per annum since being discovered in 2006. The state only got a small slice of the revenue and the community got even less.

Biti said there are 76 000 women in India polishing the diamonds of Marange, an operation that should surely be done by the local community in Zimbabwe, he said.

"You see poverty where the diamonds have been extracted," he said. "It is the most underdeveloped societies."

Diversification and industrialisation key

Biti pleaded with African leaders and mining leaders to finally see the light and create a sustaaddictinable, diversified and integrated mining strategy that benefits the community they operate in.

"We need a major paradigm shift for all the players including government, mining houses, and communities to reinvent mining for the African continent," he said. "We must revisit the mining ethos for Africa and create a mutually transformative relationship.

"We need a win-win situation aimed at transforming the mining sector in Africa from a high value, low impact industry to a high value, high impact industry."

The mining industry should protect its future through dialogue with policy makers, to ensure there is transformative agreement towards industrialisation, said Biti.

Source: Fin24

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